Railroads, shippers spar over competitive switching

Monday, June 03, 2013

The American Association of Railroads (AAR) and National Industrial Transportation League (NIT League) last week sparred over proposed changes in railroad regulation.
The AAR, which represents the country's "Class 1," or largest freight railroads, last week claimed they "could lose revenue up to 80 percent of their entire annual capital budgets if a forced competition scheme" proposed by the NIT League was adopted.
The comments from the railroad association are in response to the Surface Transportation Board
proceeding, EP 711 – Petition for Rulemaking to Adopt Revised
Competitive Switching Rules, which was initiated by a NIT League petition in July 2011.
AAR said that based on 2010 data supplied by the Surface Transportation Board, "AAR reports that an annual revenue loss of up to $7.8 billion could result from rate reductions NIT League is advocating for the benefit of a select group of shippers. Without this income, the freight rail industry could no longer invest the billions of private dollars needed to maintain and expand the nation’s 140,000-mile rail network." It said that railroads have spent upward of $110 billion in private money in capital improvements on their networks in the past 13 years. In 2010, than number accounted for $9.77 billion.
The NIT League "would like the railroad industry and users of the rail network to assume enormous risk to benefit a few powerful shipping groups,” said AAR President and CEO Edward R. Hamberger. “This is an attempt to favor a few Fortune 500 companies at the expense of the many American businesses that rely on freight rail."
NIT League President and CEO Bruce Carlton said, “Our members’ request is simple and straightforward: help us bring a measure of fair competition to the captive rail-shipper market without harming the Class I railroads. It is clearly in our members’ interest to have a strong and viable rail system capable of meeting their needs without sacrificing the rails’ economic health. Our reply comments make it clear that the railroad industry’s negative comments to our proposal are speculative and without sound factual basis.” The NITL has further clarified its stance on the issue in a press release.
The NIT League is one of the oldest and largest national associations representing both domestic and international shippers. It says many members are “captive shippers” who operate facilities or are shipping to customers that have access to only a single rail carrier and would benefit from the competitive switching proposal.
The League said the AAR’s estimate of the scope of its competitive switching proposal "impacts is wrong. The methodology and assumptions used by the rail group and its experts are 'fundamentally flawed' and exaggerate the economic impacts on carrier revenues and the number of rail carloads affected."
It said the railroad's claims that the competitive switching proposal would disrupt service or operations are false. Additionally, the carrier industry’s claims that the proposal would negatively impact shippers that do not qualify for switching is without merit."
The NITL urged the STB to move as quickly as possible in advancing the CSP so that competitive benefits may flow to affected shippers. For a copy of the NITL’s comments and accompanying verified statements, click here. - Chris Dupin